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Bullish Sentiment Creeps Back Into Oil Markets

While fears of a global recession are still very much alive and kicking, oil traders have been opening increasingly bullish positions in the belief that the selloff earlier this month was overdone.
Bullish Sentiment Creeps Back Into Oil Markets
Bullish Sentiment Creeps Back Into Oil Markets
Bullish Sentiment Creeps Back Into Oil Markets
Chart of the Week
Bullish Sentiment Creeps Back Into Oil Markets
- The spread between the world’s two leading crude benchmarks, Brent and WTI, is as wide as it has been in more than three years, moving as far as $8.50 per barrel recently.

- Previous strength in WTI has been tangibly beaten down by weakening gasoline demand and several consecutive stock builds.

- While Europe has plenty of its own demand problems, mostly consequences of Russia’s invasion of Ukraine, the strength in the prompt months is still there, with the 1-month ICE Brent spread surging to an all-time high of $5 per barrel today.

- US crude exports have seen a substantial drop compared to record highs seen in April-May, but the wide Brent-WTI spread will provide a huge boost to European buying of the American benchmark.

Market Movers
- With Chinese drillers moving into ever more sophisticated offshore projects, state-owned oil firm CNOOC$CNOOC(00883.HK)$has opened bidding for 13 blocks in the South China Sea, actively seeking foreign participation in China’s upstream industry.

- Despite Trafigura leaving the project earlier this month, Russian state-controlled company Rosneft started construction of the 600,000 b/d capacity Vostok Oil terminal in the Arctic zone, expected to start operations in late 2024.

- UK energy major Shell $Shell PLC(SHEL.US)$ made a final investment decision on the Jackdaw gas field, initially rejected by British authorities, and now expects to reach 40,000 boe/d of peak gas production by the mid-2020s.

Tuesday, July 26, 2022

For the second straight week, the main oil futures contracts have seen a marked rejuvenation in open interest, primarily coming from bullish long positions. This suggests that, despite ongoing fears of an economic recession, traders believe that the selloff earlier this month was overdone. This has also translated into the markets largely ignoring the return of Libyan oil. In addition, Europe’s natural gas woes have strengthened demand prospects for middle distillates, with diesel switching in the winter months now a very real possibility. With the Brent-WTI spread as wide as ever, ICE Brent has been flirting with the $107 per barrel mark in today’s trading session. $Camber Energy(CEI.US)$ $Imperial Petroleum(IMPP.US)$ $Crude Oil Futures(MAY4)(CLmain.US)$ $ProShares UltraShort Bloomberg Crude Oil ETF(SCO.US)$ $Occidental Petroleum(OXY.US)$ $Indonesia Energy(INDO.US)$
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